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                   DISSENTING STATEMENT OF 
             COMMISSIONER HAROLD FURCHTGOTT-ROTH

Re: BellSouth Corporation, Order, EB Docket No. EB-00-IH-
0134, Acct. No. X32080035.

     I cannot approve of the consent decree that the 
Commission adopts today.  The Commission's assertion of 
jurisdiction over this matter sets this agency on a course 
that is completely at odds with the framework that Congress 
intended for local exchange carriers to use to reach 
agreements regarding the terms on which competing carriers 
will use incumbents' networks.  Moreover, the agency has 
predicated its investigation of this matter on a one-sided 
set of facts, where the complaining party did not bother to 
file any sort of formal complaint, either here or at a state 
commission.  As far as I can tell, the Commission has 
browbeaten BellSouth into paying a $750,000 fine and 
agreeing to a number of conditions simply for proposing to 
include two terms that the agency thinks questionable in a 
non-disclosure agreement.  I therefore dissent from this 
decision, and I regret that BellSouth found it necessary to 
negotiate this decree with the Enforcement Bureau.

     Background.  Nearly two years ago, Covad and BellSouth 
voluntarily negotiated a third amendment to their existing 
interconnection agreement, which applied to several states 
in BellSouth's territory.  The effective date of that 
amendment was December 1, 1998, and the term was for two 
years.1  In this contract, the parties agreed to temporary 
prices for certain network elements that BellSouth would 
provide.  At Covad's request, the parties agreed that prices 
for BellSouth's network elements would be ```trued-up (up or 
down) based on final prices either determined by further 
agreement or by final order, including any appeals, in a 
proceeding involving BellSouth before the regulatory 
authority for the state in which the services are being 
performed or any other body having jurisdiction over this 
agreement, including the Federal Communications 
Commission.''2
 
     The December 1998 agreement did not cover the terms 
under which BellSouth would provide unbundled copper loops 
to Covad.  In the spring of 1999, the parties embarked on 
negotiating an amendment to their agreement regarding this 
network element, and this consent decree is the result of a 
dispute that arose during those negotiations.  

     BellSouth proposed an amendment that, among many other 
things, set the rates at which it would provide its 
unbundled loops to Covad.  Covad objected to these rates and 
asked BellSouth for cost studies to show that the rates 
conformed with the Commission's pricing rules.3  BellSouth 
contended that these data were confidential and asked Covad 
to sign a nondisclosure agreement before BellSouth disclosed 
the information to Covad.4

     The draft nondisclosure agreement proposed by BellSouth 
provided that BellSouth's ``Confidential Information'' would 
not be ``revealed or distributed'' to anyone other than 
Covad's ``Authorized Representatives.''  Paragraph 7 of the 
draft agreement provided that ``[i]n the event [Covad] is 
required by law, regulation, or court order to disclose any 
of [BellSouth's] Confidential Information, [Covad] will 
promptly notify [BellSouth] in writing prior to making any 
such disclosure in order to facilitate [BellSouth] seeking a 
protective order or other appropriate remedy from the proper 
authority.''  In addition, Paragraph 5 provided that both 
parties were to treat the negotiations regarding Covad's 
purchase of unbundled network elements as confidential and 
specified that ``the discussions and conversations within 
the context of Negotiations are inadmissible in any 
proceeding conducted before a state or federal regulatory, 
judicial or administrative agency.''

     In early September 1999, Covad asked BellSouth to 
delete Paragraph 5 of the non-disclosure agreement.  It did 
not say anything about Paragraph 7.  On September 14, 1999, 
BellSouth responded that it was unwilling entirely to delete 
Paragraph 5.  BellSouth's representative told Covad that if 
it ``would like to propose different language, I would be 
happy to present it to our legal folks for 
reconsideration.''5

     On September 30, 1999, Covad signed the amendment to 
the December 1998 interconnection agreement, but declared it 
did so ``under protest.''  It asserted that it believed the 
``prices imposed by BellSouth are both unreasonable and 
contrary to federal pricing rules.''6  BellSouth responded 
on October 1, 1999, in a letter stating that BellSouth 
thought the issue regarding the rates for the unbundled 
copper loop had been resolved through previous discussions.  
BellSouth pointed out that the rates would be subject to 
``true-up'' based on final prices determined by further 
agreement or by a regulator's order.  BellSouth also stated 
that it had offered to allow Covad to review the underlying 
cost studies, but that Covad had not yet signed a 
nondisclosure agreement.7

     In a letter dated October 4, 1999, Covad again took 
issue with BellSouth's proposed nondisclosure agreement.  
Paragraph 5, wrote Covad's representative, ``precludes Covad 
from disclosing any information regarding the entire 
negotiation to `a state or federal regulatory, judicial or 
administrative agency.''' 8  Covad asserted that BellSouth 
had violated its duty to negotiate in good faith, both by 
initially refusing to disclose cost information and by 
subsequently conditioning disclosure of its cost information 
upon the execution of a nondisclosure agreement that covered 
the entire negotiation.  Covad asked BellSouth to reconsider 
the terms under which it would provide cost information 
regarding the unbundled copper loop.

     On October 13, 1999, BellSouth acknowledged that it had 
asked Covad to execute a nondisclosure agreement before 
reviewing the studies.  But it disagreed with Covad's 
reading of the proposed agreement.  ``The non-disclosure 
agreement (NDA) proposed by BellSouth would not have 
precluded Covad from providing the information contained 
therein in the event that it were required to do so by an 
order of the FCC or state commission.  Paragraph seven (7) 
of the proposed agreement simply required Covad to notify 
BellSouth so that BellSouth could seek a protective order or 
obtain an order that ensured that the confidential 
information was accorded proprietary treatment.''9  In 
addition, BellSouth contended that, in Paragraph 5 of the 
agreement, it merely sought to keep confidential the 
discussions and conversations held during the negotiations, 
in the same way that the rules of evidence make settlement 
discussions inadmissible in litigation.  ``If Covad wishes 
to introduce cost studies into arbitration, it can certainly 
seek to do so, subject to appropriate objections and 
requests for proprietary treatment.''10

     According to an ex parte pleading that BellSouth has 
submitted, representatives of BellSouth and Covad met on 
October 14, 1999.11  According to BellSouth, Covad's 
representatives indicated that they were unwilling to 
execute a nondisclosure agreement, and BellSouth proposed to 
permit Covad to review the cost studies for two hours on 
October 20, 1999.  BellSouth's pleading states that Covad's 
representative agreed to this proposal.

     Covad again expressed its unhappiness with the 
nondisclosure agreement proposed by BellSouth, stating in an 
October 16, 1999 email that it was ``troubled by BellSouth's 
insistence upon keeping ALL negotiations regarding the 
[unbundled copper loop] Amendment confidential . . . when 
BellSouth only contends that the cost studies alone are 
confidential. . . .  [W]e cannot agree to keep other aspects 
of these negotiations (i.e., our recent letters) 
confidential, when neither party contends these portions of 
the negotiations contain confidential information.''  
Covad's representative went on to say that he had already 
disclosed portions of the negotiations to entities outside 
of Covad, and that it was therefore impossible for Covad to 
comply with Paragraph 5 of the proposed NDA.  Covad proposed 
to substitute Rule 408 of the Federal Rules of Evidence for 
Paragraph 5.12  In an October 22, 1999 letter Covad insisted 
that it needed ``unfettered access to all cost information'' 
on which BellSouth's rates were based,13 and on November 4, 
1999, Covad declared that BellSouth's proposal to disclose 
the cost information in a two-hour meeting at BellSouth's 
offices was ``entirely unacceptable.''14

     On November 16, 1999, BellSouth responded to these 
complaints.  Its letter states that Tom Allen of Covad had 
``previously agreed to come to BellSouth to examine the cost 
data'' in question, but that ``[a]pparently Covad has now 
changed its position.''15  It went on to offer to provide 
the cost study to Covad to review pursuant to section 9 of 
the companies' existing interconnection agreement.16  
BellSouth asked Covad to return the cost data to it within 
30 days.

     Covad rejected this offer on December 2, 1999.  It 
argued that although this offer was better than what had 
been previously proposed, ``it still prevents Covad from 
effectively using the information in negotiations with 
BellSouth.''  ``To arbitrarily limit Covad's access to the 
cost information for thirty days when the negotiations will 
likely last beyond that period creates an improper disparity 
in bargaining power that favors BellSouth.''17  Covad 
demanded that BellSouth deliver the cost information to it 
no later than December 8, 1999, asserting that any failure 
to do so would violate BellSouth's duty to negotiate in good 
faith.  And on January 28, 2000, Covad sent a follow-up 
letter that it said served as ``another formal request from 
Covad for unfettered access to the . . . cost studies.''18  
To date, Covad has declined to sign a non-disclosure 
agreement, and BellSouth has not provided Covad with the 
disputed cost information.

     Sometime last spring, Covad apparently informally 
contacted the Enforcement Bureau and alleged that BellSouth 
had violated its duty of good faith negotiation in the 
course of these negotiations.  Covad did not file any formal 
complaint with this Commission, nor did it ever formally 
raise this issue before a state commission.  An 
investigation ensued, and this consent decree is the result.
      
     The Commission Lacks Jurisdiction to Enter Into this 
Consent Decree.  Section 251(c)(1) requires both incumbent 
and competing local exchange carriers to negotiate in good 
faith the terms of interconnection agreements.  Section 252 
sets out a detailed framework that carriers are to use to 
reach such agreements.  Carriers may first attempt 
voluntarily to reach agreement, without regard to the 
standards set out in section 251(b) and (c).  47 U.S.C. 
252(a)(1).  If a party is dissatisfied with any aspect of 
these voluntary negotiations, it may petition a state 
commission to resolve outstanding issues.  Id. 252(b)(2).  
Parties may ask a federal district court to determine 
whether a state commission's decision meets the requirements 
of sections 251 and 252.

     The Commission here assumes, without discussion, that 
it has independent jurisdiction to enforce BellSouth's 
section 251 obligations.  In other words, it thinks that it 
may review BellSouth's conduct in voluntary negotiations to 
determine whether there has been a violation of BellSouth's 
section 251 duties, including its duty to negotiate in good 
faith.  I disagree.  The statutory framework that Congress 
devised contemplates that parties will resolve whatever 
differences they may have through the section 252 process.  
Thus, if either Covad or BellSouth were displeased with the 
course that their voluntary negotiations had taken, the 
statute directs them to take the dispute to a state 
commission and from there to a federal district court.

     The Commission here effectively bypasses this process.  
In my view, its assertion of jurisdiction is not supported 
by the statute, and the practical effect of its action will 
be to undermine the section 252 negotiation process.  
Significantly, the only court that has thus far considered 
the issue on the merits has determined the Commission's view 
of its authority independently to enforce section 251 is 
``contradicted by the language, structure, and design of the 
Act.''  See Iowa Utils. Bd. v. FCC, 120 F.3d 753, 804 (8th 
Cir. 1997).  Although the Supreme Court reversed this 
determination on ripeness grounds, see AT&T v. Iowa Utils. 
Bd., 119 S. Ct. 721, 733 (1999), I believe that the Eighth 
Circuit's understanding of the Commission's role in the 
section 251 and 252 process is the correct one, and I regret 
that no party has brought this issue before a court.  If a 
party may sidestep the section 252 arbitration process 
simply by notifying the Commission that it believes another 
party has violated section 251, the process through which 
parties are intended to reach agreement will be gravely 
disrupted.

     The Evidence on Which this Action Is Predicated Is 
Exceedingly Slim.  Even if the Commission had jurisdiction 
over this matter, however, I could not join in this 
decision.  The Commission here apparently has taken action 
based on BellSouth's proposal to include two paragraphs 
regarding confidentiality in a draft of a nondisclosure 
agreement.19  I would be very reluctant to conclude that 
this conduct, without more, constituted a failure to act in 
good faith under section 251. 

     In its Local Competition Order, the Commission 
considered section 251's good faith requirements.  It ruled 
that whether a party has acted in good faith will typically 
require a case-by-case determination, in light of all the 
facts and circumstances underlying the negotiations.20  The 
Commission specifically considered the matter of non-
disclosure agreements.  It noted that there are ``pro-
competitive reasons for parties to enter into a 
nondisclosure agreements,'' although it also concluded that 
agreements should not preclude a party from providing 
information requested by the Commission, a state commission, 
or in support of a request for arbitration under section 
252(b)(2)(B).21  The Commission also observed that a party 
might voluntarily agree to limit its legal rights or 
remedies as part of a negotiated agreement.22

     The Commission here appears to have lost sight of the 
fact that section 252(a)(1) authorizes parties to negotiate 
binding agreements ``without regard to the standards'' set 
forth in section 251(b) and (c).23  Surely this language 
means that parties should be free at least to propose 
virtually any language they choose regarding interconnection 
agreements, including the extent to which shared information 
will be kept confidential.  BellSouth did no more than that 
here.  It merely proposed boilerplate language regarding 
confidentiality of cost data, and its subsequent 
correspondence with Covad indicates that it was open to 
modifying the language of these paragraphs.  To be sure, the 
Local Competition Order ruled that agreements should not 
prevent the disclosure of information to regulatory 
authorities, but I do not understand BellSouth's proposed 
language to run afoul of this requirement.  To the extent 
there was any ambiguity on this point, BellSouth's October 
13 letter made utterly clear that it did not intend either 
Paragraph 5 or Paragraph 7 to preclude Covad from 
introducing cost information in an arbitration proceeding.

     In addition, the record indicates that Covad's conduct 
was not entirely irreproachable.  It appears to have 
declined to negotiate regarding alternative language, 
despite BellSouth's request that it propose modifications.  
Indeed, Covad insisted several times on ``unfettered 
access'' to the cost information - a demand that is clearly 
inconsistent with the Local Competition Order's recognition 
that an incumbent carrier may have legitimate reasons for 
keeping cost information confidential.  

     Moreover, it is very troubling that the Commission here 
has not acted on a formal complaint, but instead undertook 
this investigation on its own motion.  And it is telling 
that - even after November 16, 1999, when BellSouth agreed 
to make the information available to Covad on terms that 
even the Enforcement Bureau evidently thinks were acceptable 
- Covad continued to decline to review the data. Nor do I 
understand why, if Covad was so unhappy with the course that 
voluntary negotiations had taken, it failed to ask a state 
commission to resolve the matter.  If Covad did not think 
itself sufficiently harmed by BellSouth's conduct to warrant 
filing a formal pleading, ask for state commission 
arbitration, or even to review the data at issue when it was 
made available, I cannot comprehend why the Enforcement 
Bureau thought it appropriate to initiate this proceeding.

                             * * * *

     The Commission had no jurisdiction to undertake this 
enforcement proceeding.  And even assuming it had some 
authority to adopt this consent decree, the set of facts on 
which it chose to base this enforcement action is 
exceedingly troubling.  If a company can be exposed to this 
level of liability simply by proposing terms to be included 
in an interconnection or confidentiality agreement, I see no 
reason why it should risk voluntarily negotiating at all.  I 
therefore dissent from the Commission's adoption of this 
decree.
_________________________

1 See Affidavit of Brian T. Campbell, BellSouth Manager-
Interconnection Service/Pricing (Mar. 9, 2000).

2 See Third Amendment to Interconnection Agreement between 
Covad and BellSouth, 6.0 (Dec. 1, 1998).

3 Id.

4 See Letter from Brian T. Campbell to Christopher 
Goodpastor (Sept. 2, 1999).

5 See Email from Brian T. Campbell to Christopher Goodpastor 
(Sept. 14, 1999).

6 See Letter from Dhruv Khanna, Covad Executive Vice-
President/General Counsel, to Harris Anthony, General 
Counsel, BellSouth Interconnection Services (Sept. 30, 
1999).

7 Id.

8 See Letter from Christopher Goodpastor to Brian Campbell 
(Oct. 4, 1999).

9 See Letter from Brian T. Campbell to Christopher 
Goodpastor (Oct. 13, 1999).

10 Id. 

11 See Response of BellSouth to Enforcement Bureau Possible 
Notice of Apparent Liability.

12 See Email from Christopher Goodpastor to Brian T. 
Campbell (Oct. 16, 1999).

13 See Letter from Christopher Goodpastor to Michelle 
Culver, Negotiator, Interconnection Services, BellSouth 
Interconnection Services (Oct. 22, 1999).

14 See Letter from Christopher Goodpastor to Brian T. 
Campbell (Nov. 4, 1999).

15 See Letter from Brian T. Campbell to Christopher 
Goodpastor (Nov. 16, 1999).

16 Section 9 of the parties' existing agreement provides for 
the use of confidential information exchanged by the 
companies.  See Third Amendment to Interconnection Agreement 
between Covad and BellSouth, 9.0 (Dec. 1, 1998).

17 See Letter from Christopher Goodpastor to Brian T. 
Campbell (Dec. 2, 1999).

18 See Letter from Tom Allen, Covad Vice President, ILEC 
Relations to Jerry Hendrix, Senior Director, BellSouth 
Interconnection Services (Jan. 28, 2000). 

19 Consistent with an agreement between the Enforcement 
Bureau and BellSouth, the Commission was barred by the 
statute of limitations from taking any enforcement action 
based on conduct that occurred prior to August 25, 1999.  
See 47 U.S.C. 503(b)(6).

20 Implementation of the Local Competition Provisions in the 
Telecommunications Act of 1996, 11 FCC Rcd 15499, 15575 
[150] (1997).

21 Id. [151].

22 Id. [152].

23 Since parties may voluntarily negotiate agreements that 
depart from section 251's requirements, I do not understand 
why, at this stage of negotiations, Covad asserted that 
BellSouth was required to base rates for its unbundled loops 
on TELRIC.